Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

Comments

i have never thinking about al these kind of stuff but i really appriciate to all the reader of this blog because they all have great mind to think about this major topic in financial field thanks to share thier expirances with us.

I agree with you that banks should take some necessary efforts t just make the financial system stable and safe. I think that banks should always follow the Volker rules, so that they can control the situation.

Bankers should understand the importance of financial reforms. Global financial reform is becoming a basic need for the world, I think that we all must co-operate with this important step and also appreciate the need of this financial reforms.

I really don’t understand that why do all the bankers want to kill the financial reforms. In the current situation we need financial reforms, so bankers should also support it, but all the bankers are very aggressive to block regulation through trade deals.

I also think that all the bankers should understand very well that financial reform is really very important for us. Global financial reform is becoming a basic need for the world, I think that we all must co-operate with this important step and also appreciate the need of this financial reforms.

Financial reforms are really so good and it’s also good for the economy. Government and people should understand its importance and profitability. We also understand the requirement of these financial reforms.

I also heard that most of the bankers want to use NAFTA to kill financial reforms. But I don’t understand that why do they want to kill the financial reforms. In the current situation we need financial reforms, so bankers should also support it, but they are very aggressive to block regulation through trade deals.

Financial reform is the only option to improve our financial situations; this kind of reforms can help to improve economical conditions of the country. Bankers should understand the importance of financial reforms.

Economical condition of the country is really not so good. Bankers should really understand the importance of financial reforms. Global financial reform is becoming a basic need for the world, I think that we all must co-operate with this important step and also appreciate the need of this financial reforms.

Recently i ran into your website and so are already reading along. I think I’d leave my first comment. I don’t understand what to share with the exception that I’ve enjoyed reading. Nice blog. For certain i will keep visiting your blog really often

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Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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